Friday, May 04, 2007

Microsoft to Buy Yahoo! to Battle Google?

Wow! Just saw on Bloomberg TV that Yahoo! might be bought by Microsoft:

Shares of Yahoo! Inc., owner of the second most-used Internet search engine, jumped 17 percent after the New York Post reported Microsoft Corp. asked to start talks about a possible takeover.

The Wall Street Journal also talks about a possible merger. This is going to be a hottopicin the blogosphere today. It's a bit ironic since before Yahoo! acquired Overture, Overture supplied paid listings to both Yahoo! and Microsoft. After that acquisition, Microsoft built their own platform. Clearly, that hasn't succeeded. Google continues to grow, leaving both Yahoo! and Microsoft in its wake.

Will a combined Yahoo! and Microsoft company be able to compete? I'm not so sure. Having been at AOL when they merged with Time Warner, combining two companies with very different cultures doesn't always result in the synergies seen on paper. I'd think they'd be better off just partnering on a PPC advertising platform. Kill off MSN AdCenter and have both Microsoft and Yahoo! use the new Panama advertising platform. If this deal does go through, I think it'll benefit Google here. They'll continue to be nimble while Yahoo! and Microsoft will become mired in the difficult task of merging clashing cultures.

If I were a stock analyst, then, I'd say buy GOOG and sell both YHOO and MSFT on this news. (Full disclosure: I'm hedging my bets and currently own all three. Since I'm not a stock analyst, I'm going to continue to hold them all.) It'll be interesting to see what the analysts on CNBC and Bloomberg recommend regarding these three stocks today.

2 Comments:

This is a very interesting movement. But so far seems the announcement seems to be better for Yahoo (+10% in the last 24 hours) than for MSFT (-1.32%). The boys from Yahoo just made a ten percent more of value with this new!. Interesting…

That's usually the way the market reacts to acquisitions. The company being acquired is usually purchased at a premium, so their stock rises. The company doing the acquiring has to sort out the details of the acquisition and has to pay to acquire the other company. Hence, the short term drop in stock price.